Reseller CEO email: Will moving to SaaS stunt my growth?

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It’s time for us to once again open up the Vantiv partner email bag to see what’s happening on the front lines of our channel. Today we feature a recent exchange I had with the longtime President of a POS reseller about the VAR business model shift from break/fix to Solutions-as-a-Service (SaaS). We initially talked on the phone where I pointed him towards an industry connection of mine who could provide him with additional specifics about how to sell his entire solution – hardware, software, and services – on a monthly subscription basis.

To protect the reseller’s privacy, all names have been omitted (except mine) and some minor edits were made to the text. But other than that, this is the unvarnished truth about running a reseller business in today’s ever-changing channel.

Hi Jim,

I did speak with [name redacted] who had some great ideas to share and a finance company to boot. Her idea, which I have heard other resellers are doing, is to keep the software and hardware they are selling intact but offer them as a SaaS model. We get to keep ownership but charge them a monthly fee.

Looking into the future, is this going to satisfy the BYOD (bring you own device) millennials? Is this going to be enough to satisfy the thirst for getting reports on their phones and consolidated store reporting that they want to see for a fraction of the price? Is not moving to a cloud model today going to stunt our growth a few years from now?

I am still analyzing all the different ideas and thoughts. Thanks for introducing me to these minds again, I am still working on preparing our company for the future.

Here was my reply to this high-initiative, growth-oriented reseller:

Thanks for your note – glad you and [name redacted] could connect! The BYOD millennials situation is interesting. Seems like POS resellers need to increase their security expertise in order to accommodate BYOD. If the owner or store associate wants to use their own device, the merchant has to make sure it’s super secure. The safest way to satisfy merchants is a secure POS system that serves as the hub with easy-to-use tablets in the hands of the associates.

As far as stunting growth, shifting to the SaaS model does impact you negatively in the short-term. But resellers I’m engaging with – I just received two emails this week on this topic – say that this is far better for them in the long-term, but they admit they have seen a dip in sales revenue short-term.

One key is to migrate your customers over a period of years to the SaaS model. If you do it all at once, you could kill your cash flow. But if you pace yourself, the decline in revenue isn’t as severe. Some resellers are only migrating a small percent of their merchants to SaaS (e.g. 10-15%) each year and have all their new merchants go on the SaaS model to mitigate the impact on their short-term cash flow.

These resellers and I agreed that shifting to the SaaS model may cause you to lose the sprint (lower quarterly/annual sales revenue for a couple years), but business is a marathon and SaaS will help you win that race.

I’m happy to discuss this anytime you like. Thanks for being a Vantiv partner and thanks for being brave with changing your business!

Jim

After this email exchange, I talked SaaS with a channel executive who has worked the past 15+ years on the general computing/networking side of the IT channel, so he’s been privileged to witness many VAR migrations to the as-a-Service model. I asked him about point of sale resellers who view the shift to as-a-Service as a threat their future.

“It’s a threat only for those who don’t use it as an opportunity,” he told me. “Haven’t they (POS resellers) decided to own the entire network? That’s where they need to go. They can own the network and charge for services attached to the network. An MSP (managed services provider) could clean up in this space if they wanted to and displace whoever is providing just the hardware.”

If you read my write-up on last month’s Retail IT VAR of the Future Conference, you learned that’s already happening in some pockets. Two New York City MSPs, including Tom Clancy, the President of Valiant Technology, shared POS sales anecdotes on the event’s main stage. “We’re basically ripping business away from someone who’s wearing a (software) vendor’s logo on their polo shirt,” Clancy said. “I let them know I’m absolutely general and agnostic. I can come in and solve any of your problems. Any layer in the technology stack, I have relationships with those vendors.”

The good news is that many POS resellers are already deep into their transition to SaaS – setting an example that you can follow. Below is a slide from my May 18 Vantiv partner webinar titled “Recurring Revenue Recommendations for Profit-Conscious POS Resellers,” where I share several POS reseller SaaS success stories. (Click here if you don’t understand the Kerri Strug/Bela Karolyi reference from the 1996 Olympics.)

As this slide is displayed, I tell the story of a third-generation POS dealer whose business model “back in the day” was simplistic. The dealer’s owner would refurbish a half dozen cash registers, load them into his station wagon, and then drive south to sell them, swapping out the old registers along the way. He’d then go back to his shop, refurbish what he collected, and drive north with these registers to repeat the process. Now that’s an old-school business model.

Today this dealership has shifted their business to provide SaaS and managed services, and they’re enjoying much higher profits. They adopted RMM (remote monitoring and management) a few years back and today include RMM in all their service agreements. New managed services offerings are included in the next renewal of the contract at a slightly higher price. There were of course spits and sputters as the reseller shifted to SaaS, but now that model is having a positive impact on the reseller’s cash flow and business value.

If a dealer who made sales out the back of a station wagon can transition to the SaaS model, so can you. Yes, your top line growth will take a hit short-term, but this business model will make your business healthier in the long run.

YOU CAN DO IT! But you don’t have to do it alone. My job as a Reseller & ISV Business Advisor for Vantiv’s PaymentsEdge Advisory Services is to help Vantiv partners implement best practices, including the transition to the SaaS business model. Please email me if you would like to take advantage of a free one-hour consultation through our advisory services program.

Jim Roddy is a Reseller & ISV Business Advisor for Vantiv’s PaymentsEdge Advisory Services. He has been active in the POS channel since 1998, including 11 years as the President of Business Solutions Magazine, six years as a Retail Solutions Providers Association (RSPA) board member, and one term as RSPA Chairman of the Board. Jim is regularly requested to speak at industry conferences and he is author of the book Hire Like You Just Beat Cancer.